Have questions about long-term care? Here’s a guide that can answer many questions about long-term care. #JointLTC

Long Term Care

Longevity Risk: Have you planned for living too long?

You have heard of Market Risk, Inflation Risk, Interest Rate Risk and a few others but have you made plans for just living way too long?

The question of how much money is needed in retirement leads to another question which is perhaps the most difficult and the most central issue you as the advisor face when helping your clients prepare for retirement: How long should you expect clients to live? What is their longevity risk? Getting this variable exactly right is virtually impossible. Getting it wrong can have a profound impact on a client’s quality of life, lifestyle, and legacy.

Will you live to age 85? 90? 95? 105?

Longevity Risk Defined

So what is longevity risk? Longevity risk is the risk that people on average will live longer than expected. Due to improvements in medical technology, nutrition, disease control, public health, and environment, human life spans have improved very rapidly and very significantly. The National Center of Heath Statistics reports that between 1975 and 2016, life expectancy at birth increased from 72.6 to 78.8 years for the total U.S. population. For males, life expectancy increased from 68.8 years in 1975 to 76.3 years in 2016, and for females, life expectancy increased from 76.6 years in 1975 to 81.2 years in 2016. You can view the report at: https://www.cdc.gov/nchs/data/hus/hus16.pdf#015.

The problem is that many individuals underestimate their “average” life expectancy. In fact, according to a study conducted by the Society of Actuaries (SOA), titled Risks and Process of Retirement Survey, they reported that almost half of retirees and pre-retirees in the U.S. under estimate average life expectancy. The study asked respondents about their views respecting longevity risk. Here are some of the results:

  • Approximately four in 10 respondents (43% of retirees and 38% of pre-retirees) underestimate average life expectancy by five years or more, the report Another two in 10 underestimate it by two to four years;
  • Four in 10 retirees (42%) and pre-retirees (41%) correctly respond that about half of 65-year-old men and women can expect to live until median life expectancy (age 83 for men and age 86 for women). Two in 10 (21% of retirees and 20% of pre-retirees), believe that fewer than half will live at least until that age, while approximately one-third (31%), and 36%, respectively believe about 75% or more will live until then;
  • Typical retirees and pre-retirees see themselves living until age 84 (median for retirees) or 85 (median for pre-retirees). The report notes, however, that one- quarter of retirees (24%) and almost three in 10 pre-retirees (28%, up from 15% in 2005) think they will live until age 90 or later; and
  • At the other extreme, one in 10 retirees (9%) and pre-retirees (10%, down from 16% in 2005) do not think they will reach age 75.

Of course, averages alone don’t tell the entire story since once we reach our retirement years, the chances of surviving for another 20 to 30 years are substantial. In fact, as we survive each stage of life and the associated risks, the odds of us surviving to higher ages increase.

Figure 3.1 shows the life expectancies of 65-year-old Americans. According to the Social Security Administration mortality tables, a 65 year-old man has a 22% probability he will live to age 90, while a 65 year-old female will have a 34% probability she will live to age 90.

Figure 3.1

Probability of Today’s 65-Year-Old Living to Various Ages

65 Year-Old Male 65-Year-Old Female 65 Year-Old Survivor
Age Probability Age Probability Age Probability
80 61% 80 71% 80 88%
85 41% 85 54% 85 73%
90 22% 90 34% 90 49%
95 8% 95 6% 95 23%

Source: Social Security 2010 Mortality Tables with 1% mortality improvement. https://www.ssa.gov/planners/lifeexpectancy.html

Why not give our office a call and let us explain how to get ready for Longevity Risk.  Call 215-886-2122 and we can show you how to plan for life.

Which is Better – Medicare Medigap Plan F Or Plan G?

Medicare Plan F or G

Create These 2 Key Documents Now

Power of attorney

LegalZoom defines power of attorney (POA) as, “a document you can use to appoint someone to make decisions on your behalf. The person you designate is called an ‘attorney-in-fact.’” There are three main elements for a valid POA: (1) the person signing the document (the principal) must be mentally competent and acting without undue pressure from anyone; (2) the document must contain the date of execution; and (3) the signature must be notarized or be witnessed by two unrelated adults. State laws vary, so see an attorney for advice.

There are several important reasons for having a POA. For one, if there is no designated agent, the state may step in and appoint a guardian, a decision over which the family will have no say. Also, it is critical to have a financial overseer if and when a senior’s mental health declines.

In practice, a POA is very flexible, suiting the needs of each individual family. It can be “special” or “limited,” meaning that authority is granted only for a set period of time or for a particular transaction. No other powers are given. Conversely, a durable power of attorney allows an agent to manage all the affairs of the principal for any length of time, although it does expire at the time of death. A springing POA goes into effect only when a specific, predetermined event occurs, i.e., the principal becomes incapacitated. It can be durable or limited. Also, the agent can be granted as many or as few powers as the principal wants.

Caution needs to be taken when choosing an agent, especially in regard to financial matters. Dishonest agents have used POAs as opportunities to steal from unsuspecting seniors. We encourage you and your loved ones to sign a POA, but never pressure them about who to choose.

In fact, it might be you who is chosen to take on the role of attorney-in-fact. Caring.com, an online resource for caregivers, offers the following tips for preparing to become a POA:

  • Create a caregiving team—people who can advise you and be the resource you need to make good decisions.
  • Consider all ramifications of a decision, not giving in to what others may think or pressure from doctors or professionals. Choose what is best for your family member.
  • Do some research on accounting, medical terminology, and counseling.
  • Give yourself permission to make mistakes.
  • Know the current state of affairs for the person you will be representing, both financially and medically.
  • Establish a cordial relationship with the rest of the family.

Health care directive

A health care directive is also referred to as a medical power of attorney or an advance directive. LegalZoom defines a health care directive as a “document that explains a person’s health care preferences when he or she is unable to make those choice for him or herself.” Some directives may designate a health care agent, a person given the authority to make medical decisions on the principal’s behalf.

A health care directive is not the same as a living will. A living will is limited to situations when the principal is terminally ill or permanently unconscious. It does not apply to any other situations where medical decisions might need to be made. However, a living will can be useful to give some guidance to the health care agent.

WebMD gives these guidelines about choosing, or helping a parent choose, a health care agent:

  • Choose someone you trust, who knows you well and who can handle stress and emotional turmoil.
  • Consider medical issues and your care options, then take the time to put them in an advance directive and/or discuss your values and preferences with the agent.
  • Don’t assume that a child or spouse knows what you want. Talk openly about your wishes.
  • It’s not possible to discuss every situation that would arise, so choose someone who knows what is important to you.
  • Check with your state about required documents. Make sure you complete everything.
  • Tell your family, doctors, and anyone else involved in medical care who your agent is.

We all hope our loved ones remain healthy and capable as long as possible, but the reality is that they will one day become compromised at some level. Be assured that getting your elders to choose now who will make decisions when they cannot is actually the best way to preserve their independence.

401k A Barometer of Retirement Health

When I was younger, there were advertising campaigns that advised people to check their blood pressure because it’s always a great barometer of one’s health. When I was a bit older, the campaign with blood pressure was so successful, they eventually started a campaign for people to find out their cholesterol level. What a shame that people do not check their investments in their 401k or other pension plans. It is a barometer of one’s Retirement Health.

What Is Advance Care Planning?

(from the NIH website)

Advance care planning involves learning about the types of decisions that might need to be made, considering those decisions ahead of time, and then letting others know—both your family and your healthcare providers—about your preferences. These preferences are often put into an advance directive, a legal document that goes into effect only if you are incapacitated and unable to speak for yourself. This could be the result of disease or severe injury—no matter how old you are. It helps others know what type of medical care you want.

An advance directive also allows you to express your values and desires related to end-of-life care. You might think of it as a living document—one that you can adjust as your situation changes because of new information or a change in your health.